For many, the New Year symbolizes a fresh start, the opportunity to leave things lie and embrace a new chapter. For some of the most popular daily fantasy sports apps, when the ball dropped at midnight, they still carried a challenging regulatory environment over with them into 2024.
The LSR staff voted the ongoing regulatory battles over pick’em games as the top story of last year.
Regulators in 10 states either recently banned or are contemplating banning player vs. house pick’em DFS, where users parlay over/under selections on different athletes in return for a payout equal to multiple times their entry fee.
Those states include:
- Arizona
- California
- Florida
- Maine
- Michigan
- Mississippi
- New York
- North Carolina
- Virginia
- Wyoming
Wyoming first domino to fall in 2023
This year’s cascade of daily fantasy sports crackdowns began with Wyoming in July. Leading pick’em operators PrizePicks and Underdog Fantasy received their first cease and desist orders, several months after a sports betting lobbyist emailed an article to the Wyoming Gaming Commission regarding those companies. Both companies continue to operate there despite the orders.
Those letters were sent a week before FanDuel Head of State Government Relations Cesar Fernandez made public comments about “companies today posing as fantasy sports operators, and they are running illegal sportsbooks.”
In response, some companies blamed DraftKings and FanDuel of pressuring regulators to curtail competition. Executives with both companies brushed off those accusations, while lobbyists representing those companies have been more vocal.
Daily fantasy sports apps adapt
Just as fantasy sports have evolved from traditional season-long formats to daily drafts to pick’em contests, the companies under fire have begun to adapt to their new regulatory challenges in some states while holding firm in others.
In November, Underdog switched its pick’em games to a peer-to-peer format in several states, which for some regulators had been a sticking point between classifying them as gambling or skill-based. The company has indicated it plans to pivot to the same format in additional states.
That same month, PrizePicks made its games free-to-play in Michigan. It plans to roll out those contests in additional states as well.
Following conversations with state regulators, both companies tweaked their offerings in Colorado, where pick’em is now centered on fantasy scores instead of individual stats.
Sportsbooks debut products to compete
DraftKings rolled out its own version of pick’em in December, and plans to bring what it has marketed as peer-to-peer to other states. It is a notable change from its traditional fantasy formats.
The most downloaded DFS apps through the first 14 weeks of the NFL betting season, per Citizens JMP Securities:
| App | Downloads | Percent Change YoY |
|---|---|---|
| PrizePicks | 1,937,000 | +127% |
| Underdog | 1,027,000 | +204% |
| Sleeper | 773,000 | +231% |
| Betr | 630,000 | +500% |
| DraftKings | 519,000 | -19% |
| FanDuel | 332,000 | -10% |
Largest markets eye pick’em
The largest markets pick’em operators stand to lose have also been resistant to traditional legal sports betting markets.
As state tribes unite against another effort to legalize online sports betting, California Attorney General Rob Bonta is working on an opinion regarding the legality of DFS pick’em games. His review comes eight years after former Attorney General Kamala Harris declined a lawmaker’s request to explore the same issue.
Florida, meanwhile, sent cease and desist letters to pick’em operators just as the Seminole Tribe who controls Florida sports betting chose to relaunch to relaunch the Hard Rock Bet app. A recently introduced bill in the Florida legislature would protect DFS companies.
Legal states crack down on pick’em DFS
New York’s rules, finalized in October, state that “[fantasy] contests shall not be based on proposition betting or contests that have the effect of mimicking proposition betting.”
DFS operator Sleeper left the state shortly after, though PrizePicks and Underdog still offer pick’em games there. It is unclear whether New York will forcibly order them to leave, though both companies have continued operating in other jurisdictions despite cease and desist letters.
Under the rules, each company would have to register as a sports betting operator to remain in the Empire State, which would cost $25 million for a license and put them in line for the state’s 51% tax on online sports betting. They would also have to comply with New York’s minimum betting age of 21, versus 18 for DFS.
A less ‘financially intensive’ business
The difference in operating costs between being regulated as a DFS or sports betting is not unique to New York.
Before Betr, a relative newcomer to sports betting, launched pick’em games across the country, founder Joey Levy told LSR that he sees pick’em as much less “financially intensive” than online sports betting.
More states set to review daily fantasy sports
Vermont is set to launch legal sports betting via three apps on January 11, 2024. As part of the law that legalized sports betting in the state, the Department of Liquor and Lottery has been directed to study overlaps between how they regulate both industries.
Virginia, the first state to pass a law legalizing DFS, may take up the issue in its statehouse once again in 2024. State Attorney General Jason Miyares, responding to State Delegate Wren Williams, issued an opinion earlier this month identifying pick’em contests as de facto sports betting. It could help formulate a DFS bill , though it is not legally binding on its own.
North Carolina may also revisit the issue. As part of the state’s recently passed sports betting law, regulators were directed to examine their DFS rules. After pushback from operators, they decided to put that on hold until they launch sports betting later next year.
